Information letter: First Nation-initiated audits and examinations

What is a First Nation-initiated audit or examination?

• First Nation-initiated Audits or Examinations are part of compliance audits and apply to oil and gas production and sales-related activities on designated First Nation lands.
• Section 85 of the Indian Oil and Gas Regulations, SOR/2019-196 (Regulations) specifies a "First Nation may conduct an audit or examination for the purpose of verifying the royalties payable on oil or gas recovered from its lands."
• This means that First Nation-initiated Audits or Examinations focus on oil and gas royalty-related items such as production volumes, prices, and applicable deductions.
• First Nation-initiated Audits or Examinations are required to meet all application requirements defined in the Regulations.

What is the First Nation-initiated audit or examination process?

Step 1

• First Nation and Indian Oil and Gas Canada (IOGC) have a proposed audit or examination discussion

Step 2

• First Nation develops and submits preliminary application to IOGC for review
• IOGC reviews and provides feedback to the First Nation on the preliminary application, and notifies if the application meets criteria

Step 3

• Once approved by IOGC, First Nation submits finalized Application for Preliminary Approval to IOGC

Step 4

• For IOGC-accepted applications, First Nation develops a Request for Agreement with Minister
• IOGC, under its delegated authority, works on securing Ministerial agreement

Step 5

• Once Ministerial agreement is finalized, First Nation Auditors conduct Audit or Examination^{Footnote 1}

Step 6

• First Nation submits the Final Audit or Examination Report to IOGC

Step 7

• IOGC reviews the Final Audit or Examination Report and integrates findings within IOGC Royalty System

Funding considerations and timing

• First Nation-initiated Audits or Examinations may be self-funded by the First Nation.
• In the instances when a First Nation is not able to self-fund their First Nation-initiated Audit or Examination, IOGC may be able to fund an application based on risk, priorities, and availability of funding.
• IOGC has limited funding available each fiscal year and will accept applications until May 31st annually.
• IOGC will review submitted applications within 30 calendar days of the May 31 annual deadline.
• IOGC will engage with the successful applicant(s) upon review and acceptance of the application.

First Nation responsibilities

First Nations are responsible for leading the entire process for a First Nation-initiated Audit or Examination in consultation with IOGC.

Activities may include, but are not limited to:

• engaging with IOGC to review the process, available options, and requirements
• identifying a staff member/Auditor/contractor with oil and gas technical expertise and knowledge
• preparing and submitting the Preliminary Application to IOGC
• preparing and submitting a Request for Agreement with the Minister (IOGC) including the selection of Auditor/contractor that meets required credentials
• overseeing the audit process, including scope of work, timelines, and deliverables
• requesting information from the audited company and reviewing the information with the Auditor/contractor
• initiating meetings with IOGC and the Auditor/contractor, as required
• reviewing and finalizing the Audit or Examination Report with the Auditor/contractor
• submitting Final Audit or Examination Report, along with working papers, to IOGC
• meeting with IOGC to discuss the findings and any amendments to the IOGC royalty inputs

Background

Two features of the Indian Oil and Gas Act, RSC 1985, c I-7(Act) and the Regulations allow IOGC, on behalf of the Minister to:

1. conduct audits and examinations of documents and activities with respect to oil and gas production on First Nation lands; and
2. grant authority to First Nations to conduct similar audits and examinations with respect to companies operating on their respective First Nation lands.

Audit and examinations are covered in Section 10 of the Act and First Nation-initiated audits and examinations are outlined in Sections 85 to 92 of the Regulations.

For further information or to apply for a First Nation-initiated audit

Email the Audit, Compliance and Enforcement Unit at royaltyproductionaudit@sac-isc.gc.ca with your questions or to set up a meeting to discuss First Nation-initiated audits or examinations.

We can also be reached at:

Indian Oil and Gas Canada
c/o Manager, Audit, Compliance and Enforcement
9911 Chiila Boulevard Suite 100
Tsuut'ina AB  T3T 0E1
Phone: 403-292-5625
Fax: 403-292-5618

Related links

• Contact us